January soybeans advanced 9.75 cents on volume of 244,694 contracts. Volume was just a fraction above November 21 when the January contract gained 26.50 cents on volume of 243,456 contracts and total open interest increased by massive 30,331. On November 22, total open interest increased massively again, this time by 15,367 contracts, which relative to volume is approximately 140% above average meaning aggressive new buyers continue to enter the soybean market and drive it to new highs for the move, which on November 22 was 10.33. The May and July 2017 contracts lost 1,313 of open interest.
As this report is being compiled on November 23, the January contract is trading close to unchanged after making a new high for the move of 10.35 3/4, which takes out the October 27 high of 10 31 and is the highest print since 10.38 1/4 made on July 20. January soybeans remain on short and intermediate term buy signals. Please call or email for recommendations on how to trade this market.
WTI crude oil:
January WTI crude oil lost 21 cents on volume of 1,442,538 contracts. Volume increased substantially from the previous day, November 21 to when the January contract gained $1.88 on volume of 1,205,418 contracts and total open interest increased by a disappointing 15,417. On November 22, total open interest increased by 21,014 contracts, which relative to volume is approximately 40% below average.
It appears in yesterday’s trading there was a battle between buyers and sellers and sellers were able to edge the market slightly lower. Additionally, in yesterday’s trading, the January contract made a high of 49.20, which is the highest print since 50.42 made on October 28. As this report is being compiled on November 23, the January contract is trading 14 cents higher and has made a daily high of 48.43 and a low of 47.40. According to OIA’s protocols, the January contract will not generate a short term buy signal on November 23 because it is 2 cents below OIA’s key pivot point for November 23 of 47.42. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.3 million barrels from the previous week. At 489.0 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 0.1 million barrels last week.
Heating oil: On November 22, January and February 2017 NY heating oil generated short term buy signals and are getting close to generating intermediate term buy signals.
Gasoline: January NY gasoline is getting close to generating short and intermediate term buy signals. However, a short term buy signal will not occur on November 23.
Natural gas: January natural gas is getting close to generating a short term buy signal and this will occur when the daily low is above OIA’s he pivot point for November 23 of 3.067 and the low thus far and trading on the 23rd has been 3.036.
January natural gas advanced 2.3 cents on light volume of 375,874 contracts. Total open interest declined by a sizable 11,108 contracts, which relative to volume is approximately 10% above average. The December contract accounted for a loss of 19,148 of open interest and there were insufficient open interest increases in the forward months to offset the decline in December. Yesterday’s abysmal open interest action relative to the minor price advance follows the equally abysmal open interest action on November 21 when the January contract gained 9.7 cents on low volume of 331,510 contracts and total open interest increased just 661 contracts, dramatically below average.
As this report is being compiled on November 23, the January contract is trading 6.8 cents above yesterday’s close and has made a new high for the move of 3.179, which is the highest print since 3.194 made on November 1. The COT report released last Friday showed that managed money liquidated 1,009 of their long positions and added 20,932 their short positions. Commercial interests added 11,324 to their long positions and also added 655 to their short positions. As a consequence, managed money was long natural gas by ratio of 1.07:1, which is down from the previous week of 1.18:1 and the ratio two weeks ago of 1.39:1.
In summary, managed money has become substantially less net long and the abysmal open interest action reflects short-sellers liquidating on the rally. The natural gas market is responding to colder temperatures in the East and Midwest, and if they remain at lower levels, we expect natural gas prices to continue their advance. Wait for the short term buy signal, then a pullback lasting 1-3 days and this will be the opportunity to initiate bullish positions.
S&P 500 E-mini:
The December S&P 500 E-mini gained 7.25 points on disappointing volume of 1,266,397 contracts. Total open interest was disappointing as well, which increased only 5,490 contracts a number that is substantially below average. As this report is being compiled on November 23 the December contract is trading 1.50 lower and has taken out yesterday’s contract high of 2203.00 with the fractional new high of 2203.50.
We took a look at the monthly S&P 500 and SPY charts for 2015 and 2016. What jumped out was the fact that the pace of new all-time highs is slowing. For example, the ETF, SPY, a proxy for the S&P 500 made its 2015 high of $213.78 during May 2015 and the high for 2016 thus far is 220.79 or a gain of $7.00, or +3.5%. If an investor had purchased SPY at its 2015 high of 213.78, they would have been subjected to a horrific draw down to $181.02, the low made in January 2016 or approximately $32.00 per share.
In summary, the investor would have had to sit through horrific losses while waiting to make approximately 3.5% during the following 18 months. With the pace of the equity advance slowing there are some terrific option strategies that can be employed to take advantage of this. Please call or email with any question.
On November 10, OIA announced that the December 2016 and March 2017 S&P 500 E-mini contracts generated short term buy signals. On November 15 we announced both December and March generated intermediate term buy signals.
From the November 21 research note on the S&P 500 E-mini:
“We took a look at the E-mini during the past week when it rallied and the surprise has been the abysmal volume even as the E-mini moved up to all-time highs.”
“For example, on November 17, the December contract gained 11.50 points on volume of 1,357,544 and total open interest increased by 28,375. On November 15 the December E-mini advanced 18.75 points on volume of 1,450,548 contracts and total open interest increased by 12,698. It’s positive that open interest continues to advance along with prices, but average volume during the three rally days was 1,348,666 contracts.This is substantially below the average daily volume for October 2016 of 1,549,153 contracts and year to date average daily volume of 1,896,575. It is apparent that many would be participants remain on the sidelines.”
“However, we think this is a positive for now and that the market will continue to inch its way higher during the strong seasonal period of the year, which typically lasts through January. Once the new president is sworn in on January 20, we think all bets are off, but barring a major catastrophe, the market is likely to move ahead at least through the end of December.”